1993 (11) TMI 246 - Board - Companies Law

Summary

Issues Involved:
1. Whether the company was justified in registering the transfer and delivering the share certificates to the transferee.
2. If the company is not justified, whether a rectification can be ordered.

Issue-wise Detailed Analysis:

1. Justification of the Company in Registering the Transfer and Delivering the Share Certificates:

The petitioner, Shri Subhash Chandra, requested the company to change his specimen signatures on February 10, 1990. However, on February 8, 1990, the company received an application for the transfer of 50 equity shares owned by the petitioner along with a transfer instrument executed on January 23, 1990. The company registered the transfer on February 24, 1990, as the signatures matched the specimen on record.

The petitioner contended that the company registered the transfer despite prior intimation about changing the specimen signature and that the transfer deeds were not duly stamped as per the Indian Stamp Act, rendering the transfer void. Additionally, the petitioner claimed he lost the blank transfer deeds before January 23, 1990, and the company should have reversed the decision upon learning about the loss.

The company argued that they had no intimation about the loss of share certificates at the time of registration and that the transfer deed was complete and valid. The company also stated that they had a practice of canceling stamps to avoid inconvenience to investors, which they believed was a curable technicality.

2. Validity of Rectification Order:

The petitioner sought rectification of the register of members to restore the 50 equity shares in his name. The company had already transferred the shares to third parties who purchased them in good faith. The petitioner did not implead the transferee, R. K. Malhotra, as a party, despite being given the opportunity, and thus, the reply on behalf of the transferee was not considered.

The facts indicated that the company received the transfer documents on February 8, 1990, and approved the transfer on February 24, 1990. The share certificate was dispatched on June 2, 1990, after obtaining a clarification from the transferee. The petitioner's claim of losing the share certificates and blank transfer deeds was not substantiated as he did not implead the transferee to prove the case.

The petitioner cited cases to argue that the transfer deed was not duly stamped, making the registration illegal. However, the company contended that the stamps were canceled before the registration, fulfilling the legal requirement. The Board noted that the objective of Section 12 of the Indian Stamp Act is to ensure stamps are not reused, and the company had ensured this.

Conclusion:

The registration of the transfer was found invalid as the company did not comply with the mandatory provisions of Section 108 of the Companies Act, 1956, which requires the instrument of transfer to be duly stamped at the time of delivery. However, the Board could not order rectification of the register of members without hearing all affected parties, as the shares had been further transferred. The petitioner was given liberty to implead all parties involved in the subsequent transfers, and the company was directed to furnish details of the transfers within 30 days.

The petition was disposed of with no order as to costs.